The SEC’s Office of Compliance Inspections and Examinations (“OCIE”) released its 2015 Exam Priorities January 13. Director Andrew Bowden’s annual list details OCIE’s subject of focus for the coming year. The hot topics for 2015 include:
For Retail securities sales:
- The “retail-ization” of private funds, illiquid investments and structured or other alternative products that pose extra risks when complex products are sold to “mom and pop” investors;
- Fees & “reverse churning” (a fixed asset-based fee on accounts with little or no activity) – when account or commission fee arrangements are not well-matched to account type and activity.
- Suitability – a perennial favorite, but now under new FINRA Rule 2111 in which the customer-profile effectively is the customer (from a regulatory review standpoint);
- Branch supervision – another constant; and,
- Interest-rate sensitive products posing latent risks from the prolonged low-interest-rate environment.
Market risks, including cyber-security, best execution, and order flow.
Data Analytics, reflecting OCIE’s new “big data” capabilities and focusing on:
- Recidivist brokers, as reflected in the Wall St. Journal’s November 2014 study of broker disciplinary statistics, here.
- Micro-cap pump and dump
- Excessive trading
- Anti-money-laundering, for example by studying anomalies in patterns of suspicious-activity-report (“SAR”) filings.
OCIE also will be examining Municipal Advisors and new Investment Companies.
The Exam Priority Letter is here.